Stealing a Slice of the Company Pie

A reader of this column I'll call Stan received some jarring news upon returning to work after Christmas: His boss had been fired for doubling her paycheck for nearly five months.

"She was not very smart about the way she went about taking the money," wrote Stan, who works as an IT manager at a carpet distributor in Dalton, Ga. "She simply added money to her paycheck since she was in charge of payroll. She was found out by a year-end audit by the company accountant."

While Stan's former boss faces potential criminal charges, Stan and his coworkers are left holding the emotional bag, wondering why their office manager of two years felt compelled to steal from the company that had trusted her.

"It has been difficult for the office staff to come to terms with the theft," Stan said. "She was our friend and the theft was a violation of that friendship and our trust."

Most people who've been in the workforce at least a few years have a firsthand or secondhand story like Stan's to share. In fact, the Association of Certified Fraud Examiners reported in 2008 that U.S. companies lose 7 percent of their annual revenue to employee theft -- from inflating expense reports and abusing company credit cards to selling stolen inventory on eBay and flat-out embezzling.

But does this mean employers should also expect to see the same diminished ethics from cash-strapped employees feeling the financial pinch? Is this deep recession we're in cultivating a new crop of mini-Madoffs?

It's the Economy, Stupid

"In tough economic times, you'll see an increase in employee theft just like you'd see outside the workplace," Burke said.

"Thirty percent [who steal] are managers. If you have access [to company assets], that's when a situation is going to occur."

According to Burke, employees help themselves to a piece of the company pie for many reasons -- and not always because they're facing financial peril. They may be miffed about not getting a raise. They may be peeved about having their salary cut. Either way, they probably think the organization's too big for anyone to notice them skimming a bit off the top.

Burke's not alone in his view of crimes against corporate humanity.

A November 2008 survey of nearly 400 U.S. companies by the Seattle-based Institute for Corporate Productivity found that 24 percent have seen an increase in the theft of inventory, electronic equipment and office supplies (beyond the occasional pilfering of pens and Post-it notes). And 18 percent reported a rise in financial crimes like padding expense reports and otherwise lifting company funds.

Anatomy of a Corporate Crime

Call me a goody two shoes, but I find taking such chances with your employment record (not to mention your criminal one) outstandingly short-sighted -- especially in a job market where employers have their pick of the workforce litter and are looking for any excuse to lay off less productive employees.

Convinced that something wasn't adding up, I consulted a couple of forensic accountants who specialize in business fraud.

"There's no actual proof that theft goes up during difficult economic times," said Tracy Coenen, a certified public accountant and certified fraud examiner with offices in Milwaukee and Chicago. "It may seem like we're hearing about more fraud now, but there are more reasons for it than the economy."

For one thing, we all have fraud on the brain (thanks to folks like Bernie Madoff) and at our fingertips (thanks to the Internet), said Coenen, who's author of the book "Essentials of Corporate Fraud" (Wiley, 2008).

For another, in an effort to tighten their belts, struggling companies are scrutinizing their financial transactions and accounting practices more closely than usual. If an employee's cooking the books, the company's more likely to catch a whiff of it.

"In the last six months, we're seeing a lot of partners stealing from partners," said Chrissie Powers, a forensic accountant with Rea & Associates, Inc., an accounting firm in New Philadelphia, Ohio.

But, she said, "The fraud did not start occurring right when the economy went into a slump. It's been happening over a period of time. A fraud generally occurs over a 24-month period before it's caught."

To Catch a Thief

You might think that reference checks and criminal background checks would help companies weed out deadbeats. But according to the Association of Certified Fraud Examiners, most employees who steal are first-time offenders: Only 12 percent have been fired by a previous employer for fraud, and only 7 percent have a criminal record.

You might also think that a solid system of financial checks and balances is all a company needs to catch an internal thief. But the ACFE reported in 2008 that 46 percent of workplace plundering is detected by tips from employees, customers and vendors.

So what should you do if you catch a coworker with his or her hand in the corporate cookie jar?

Burke, the HR executive, suggests approaching your colleague with a, "Hey, what are you doing?" After all, there's nothing like a heaping dose of embarrassment to nip dishonesty in the bud.

If you're not comfortable playing McGruff the Crime Dog or you suspect a larger problem, take it to your manager, Burke said.